Subcontractors of South Korea’s three major shipbuilders may carry out massive job cuts this year due to the shipyards’ sputtering offshore businesses, industry sources said.
The shipbuilders — Daewoo Shipbuilding & Marine Engineering Co., Hyundai Heavy Industries Co. and Samsung Heavy Industries Co. — suffered an estimated 7 trillion won (US$6.09 billion) in operating losses from their offshore facility business last year alone due to increased costs resulting from delayed construction and order cancellations.
The situation is showing no signs of improvement this year with new orders for offshore facilities almost drying up, which could force their subcontractors to lay off a large number of workers and day laborers, according to the sources.
A total of 20,000 employees of subcontractors stand to lose jobs this year once the shipbuilders complete construction of offshore facilities scheduled for delivery next year, they said.
“This year, the shipyards have clinched few new orders for offshore facilities, which means almost no work for their subcontractors in the coming year,” an industry watcher said.
Hyundai Heavy Industries aims to bag offshore orders worth $4.2 billion, but its new orders stand at a mere $151 million. Daewoo Shipbuilding & Marine Engineering and Samsung Heavy Industries have yet to receive any orders this year.
Hyundai Heavy Industries has already given the pink slip to some 1,500 employees of 10 subcontractors working on an offshore project, while planning to carry out more job cuts.
Subcontractors of Hyundai Heavy Industries are reducing daily wages and benefits for day laborers and considering adopting an hourly wage system for them in a bid to cut costs, according to the sources.
The three shipyards are moving to reduce their payrolls in a desperate effort to tide over their crisis.
Hyundai Heavy Industries is set to announce its restructuring plans this week, with its local rivals also expected to sharply reduce their workforces this year.
Hammered by an industry-wide slump and increased costs, the three shipyards racked up a combined 7.7 trillion won loss last year, marking the first time that all three have lost money. They have suffered a tumble in demand for new ships and offshore facilities amid lower oil prices, with Chinese rivals scooping up a large slice of orders for smaller ships.
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